New York Probes Private-Equity Tax Practices

A New York investigation into the tax practices of the private-equity industry is looking for potential wrongdoing ranging from delay of tax payments to avoidance of them entirely.

The main focus of the investigation, say people familiar with it, is whether and how some firms convert certain management fees into investments that are eligible for more-favorable tax treatment. Partners at some of the nation's largest private equity firms have used the practice for years, though it also is one that several firms have avoided,...